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iai MAY 2014 Q 15

The table is self explanatory - it has good headings - basically it calculating the covariance between the company and the market using the standard covariance formula.

You should be able to reproduce this in Excel quite quickly?
 
Simon James said:
The table is self explanatory - it has good headings - basically it calculating the covariance between the company and the market using the standard covariance formula.

You should be able to reproduce this in Excel quite quickly?
Click to expand...

Hi,
I have got what the table does, but after that to calculate the cost of capital, the market return rate is taken to be 10%. Where does this come from? Isn't market return rate same as Rm which is computed as 0.833% in the table?

Thanks for the help!
 
10% is the total of the 12 months market return while 0.833% is the monthly average.
Average is used to calculate the beta factor and 10% is used as the overall market return, ie. Rm
 
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